Considering a Third Party for Supply Chain Management

Third-party logistics companies can allow an organization to focus energy on its core competencies and speed the process of getting a final product to market while saving production costs.

Turning the logistics of procurement, manufacturing, and the distribution of goods over to a third-party allows your business to take advantage of already established processes. A logistics company has the advantage of an established vendor list, a manufacturing plant, a storage facility, and a distribution center, so it is well-equipped to provide the manufacturing support that may save an organization time and money.

The following are services that can help an organization with order fulfillment:

• Demand forecasting: A logistics company can compile data to forecast demand in order to determine an appropriate rate of replenishment. Solid demand forecasting reduces waste and minimizes inventory that remains in the warehouse. Smart spending on inventory replenishment preserves cash flow.
• Supplier management: Logistics companies often employ experienced individuals who have the negotiating expertise and established vendor relationships to secure favorable pricing on the raw goods that go into manufacturing. Once the item is manufactured, the product is then inspected and checked for quality assurance.
• Warehousing: Although warehousing includes the storage of the product in a clean, dry facility until the merchandise is ready for distribution, other services such as picking and packing, assembly, receiving, shipping, and inventory management are often available.
• Administrative: A logistics company not only deals with the production and distribution of the goods, but also the paperwork involved, such as coding the product to keep track of what is moving in and out of the plant; invoicing; documentation of product orders, upsales, and product issues; export management, which involves screening, documenting, and recording transactions within the limits of the law; Web tracking of inventory and status of merchandise transactions; and project management services.

Comparison shopping is always important and highly recommended when looking for a logistics company. Price is not necessarily the only consideration to take into account:

• Make sure the company has experience in manufacturing and distribution in your particular industry and product line as well as a positive reputation.
• Find out the length of time the company has been in business.
• If your organization plans to export overseas, does the company have international export experience?
• What is the turnover and training provided for telephone representatives because those individuals will be interacting with your customers?
• Can it provide a temperature-controlled environment for the storage of your particular merchandise if needed?
• What is its on-time delivery history and rate of distribution?

Compare the expenditures involved in producing and distributing your product vs. the cost of using a third-party logistics company. The outlay can sometimes be offset by the savings from not having to hire additional personnel, purchase additional technology, or make capital investments in a manufacturing facility, warehouse, and transportation. Logistics companies can typically provide this service at a more cost-effective rate because of the volume with which they work.